Britain's house prices increased by 6.5 percent year on year in November, posing the strongest annual pace of growth since 2010, said the mortgage lender Nationwide on Friday.

The Nationwide's house price index survey report showed that house prices in Britain rose by 0.6 percent compared with the previous month, bringing the average price to 173,678 pounds (283,095 U.S. dollars) in November from 174,566 pounds in October this year, showing a continuous upward trend.

"Activity in the housing market has picked up strongly in recent months," said Robert Gardner, Nationwide's Chief Economist, attributing the rise of house prices largely to the improvement in the labor market and the brighter economic outlook, which has helped to bolster sentiment amongst potential buyers.

"Policy measures aimed at keeping down the cost and improving the availability of credit are also playing an important role," said Gardner.

"Indeed, mortgage rates have declined significantly from the already low levels prevailing last year," Gardner pointed out.

Data from the British central bank, the Bank of England, indicates that the interest rate on two year fixed rate mortgages for those with a 10 percent deposit has fallen from 5.6 percent to 4.4 percent over the past 12 months.

Gardner said that for a buyer purchasing the typical home over 25 years, this equates to a reduction in monthly payments of around 110 pounds or 1,320 pounds per year at the current average house price.

The Bank of England on Thursday unexpectedly announced changes of its credit incentive measure targeting at the housing market as the recent high rising house prices have caused concern of a potential housing bubble.

Central bank governor Mark Carney said that the Funding for Lending Scheme (FLS) would now focus solely on enabling greater lending to small firms, and will no longer be aimed at householders and individuals.

Carney said that the changes of the policy refocused the FLS scheme where it is most needed, to underpin the supply of credit to small businesses over the next year, without providing further broad support to household lending that is no longer needed.

He said that he saw a higher risk to financial stability if there are further rapid rises in house prices, and there were signs of house price growth picking up beyond London. (1 pound = 1.63 U.S. dollars) Endi